The Pay Transparency Directive does not require identical pay for everyone, but any pay differences must be objectively justifiable. Pay differences cannot be arbitrary; they must be based on the demands of the work and, for example, on how well the employee performs – measurably and verifiably.
This article answers these burning HR questions:
- Can good negotiation skills earn you a high salary?
- If previous pay was high, must the new role pay at least as much?
- Can you still pay top performers more?
- Experience and skills: how can they show in pay?
- How do working conditions affect pay differences?
- Do’s & don’ts: an HR checklist for justifying pay differences
Can good negotiation skills earn you a high salary?
Going forward, pay cannot be based on who is the toughest negotiator; it must be based on clear, objective criteria. Many companies and organisations are now waking up to the fact that pay levels vary widely between employees. Pay may have been set by who managed to negotiate the highest salary, but now the situation has to be corrected.
If previous pay was high, must the new role pay at least as much?
Previous pay is not grounds for pay in a new role. In a tight situation, a company may have had to hire, for example, a senior-level expert on a high salary to bring in badly needed skills. Unjustified pay gaps that have built up over time must now be addressed, however.
It pays to prevent the risk by making the grounds for pay clear already at the recruitment stage. Even under recruitment pressure, don’t promise too much on pay unless the company is ready to raise everyone’s pay.
A company may decide to pay an expert at a certain level more in order to bring critical skills into the company. In that case, however, it must be able to clearly show that those skills are strategically important right now.
Read more: How the Pay Transparency Directive changes recruitment
Can performance be grounds for higher pay?
In short, performance can still be grounds for higher pay. Traditionally, employees who perform well have been rewarded and motivated financially.
An employee’s personal characteristics or traits must not affect pay, unless it is, for example, a skill that can be verified through regular measurement. If stronger performance can be measured and objectively demonstrated, there may be grounds to pay a top performer more than a colleague who performs less well.
What matters is that performance can be measured and that it is measured regularly. That way, differences in performance can be shown concretely. Higher pay cannot be justified by a gut feeling along the lines of “they’re just really good”. If, on the other hand, performance is measured regularly against clear criteria, performance can be a justified criterion for paying more.
Experience and skills: how can they show in pay?
Additional qualifications, specialist skills or significant work experience relevant to the role can be valid grounds for higher pay. Examples include command of a particular language or software.
A general age-based supplement, however, is not justified grounds for a pay rise – age itself cannot determine the level of pay. Experience is, as a rule, an acceptable ground for pay, and in many countries collective agreements even make experience-based supplements mandatory. Still, the weight of experience in setting pay should be examined critically if it widens the gender pay gap. Pay must be based on the role, its requirements and the employee’s skills relative to those requirements, not on the employee’s personal characteristics such as age.
How do working conditions affect pay differences?
If two people do exactly the same work but one works in significantly more demanding conditions, it may be justified to pay them more. Demanding conditions can include physical strain such as noise or working in extreme temperatures, constant mental strain, or, for example, repeated exposure to threatening customer service situations. Demanding working hours or a large number of travel days can also add to the strain of the work. Shift work, for example, can be grounds for higher pay, but a strain-based pay difference cannot be justified simply by the employee’s subjective feeling that the work or conditions are hard.
Do’s & don’ts: an HR checklist for justifying pay differences
- A pay difference cannot be based on negotiation skills
- A pay difference cannot be justified by previous pay
- You cannot pay an employee more than others just because they were well paid before
- You can pay a top performer more if their performance is verifiable through regular measurement
- Experience can show in pay if it can be justified, for example as additional skills relevant to the role
- If working conditions are more demanding, a pay difference may be justified
Pay differences must be based on objective, gender-neutral criteria, such as the demands of the work, the employee’s skills relative to the job grade, and measurable performance.
Justifying pay differences doesn’t have to be a heavy, expensive consulting project
Justifying pay differences doesn’t have to be a heavy, expensive consulting project if software combines the data and gives you a place to maintain your job grading. Evenpay meets exactly these needs – it is a comprehensive tool and support for building a fair pay culture.
Evenpay is a software solution that helps you manage pay transparency over the long term and securely. It makes meeting the directive’s obligations effortless and at the same time creates an excellent foundation for working, smart pay practices well into the future. Administrative work decreases, and any pay differences stay under control: they are spotted early, they can be justified and, if needed, acted on.
Want to hear more about Evenpay? Book a free 30-minute demo and we’ll go through how Evenpay could make managing pay differences easier for your company or organisation!
